Gold rebounded on Friday after sinking nearly 2% in the previous session, even as hotter U.S. inflation data boosted bets on a Federal Reserve rate hike next week. Spot prices are still on track for a third consecutive weekly decline, while Wheaton Precious Metals climbed toward a buy point as gold miners caught a bid ahead of the Fed's meeting.
Gold prices climbed on Friday, rebounding after falling nearly 2% in the previous session, even as firm U.S. inflation data bolstered expectations for a Federal Reserve interest-rate increase next week. Spot gold rose 1.7% to $4,390.39 an ounce at 09:51 ET. Gold futures ticked up 0.6% to $4,432.30 an ounce over the same window. Yet the metal remains on track for a third consecutive weekly decline as traders weigh tighter Fed monetary policy.
Inflation data lifts rate-hike bets
Headline U.S. consumer-price growth accelerated in August as anticipated, while an underlying gauge came in slightly hotter than expected. Fed policymakers have stressed they will focus on corralling inflation when they meet next week, and Fed Chair Kevin Warsh said the central bank will "have work to do" if price growth doesn't show signs of sustainably easing to the Fed's 2% target. Markets were pricing in an 86% chance of a quarter-point rate increase this month, up from about 70% before the data, according to CME FedWatch.
More downward pressure on gold came from data on Thursday showing that costs for several components feeding into the personal consumption expenditures price index — one of the Fed's preferred inflation gauges — rose at a faster pace in August.
Oil's rally adds to the inflation picture
Oil has become part of that inflation story. Brent crude futures retreated on Friday but stayed on track to finish the week above $100 a barrel for the first time in almost four months, as the U.S. and Iran showed little sign of resolving their months-long war. Prolonged disruptions to energy supplies could push prices higher, possibly making the Fed more likely to raise rates — a prospect that may not favor non-yielding assets like gold.
However, analysts at UBS said gold's resilience doesn't mean rate expectations no longer matter, but rather that the market has already absorbed a large tightening. They said a September hike would likely trigger only a brief pullback rather than upend the metal's broader recovery.
Wheaton Precious Metals nears a buy point
The move in gold has also lifted individual mining names. Wheaton Precious Metals, which leads the mining sector among Investor's Business Daily's 30 tracked sectors, is approaching a buy point ahead of the Fed's meeting. The stock had been hovering near the entry of a double-bottom base at 154.17 and moved above that level during Friday's session, according to IBD MarketSurge data.
Second-quarter earnings, posted Aug. 6, grew 90% to $1.20 per share on an 85% increase in sales to $929 million, ahead of FactSet consensus estimates of $1.14 per share and $879 million. Gold-equivalent-ounce production rose 6% from a year earlier, helped by a 61% jump in the average realized gold-equivalent price. Mutual funds own 55% of Wheaton's outstanding shares, and funds have been net buyers in six of the past seven quarters.
Sources: Commodities & Futures News, Investor's Business Daily
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